Naira Depreciates to N1590 as Gross External Reserves Decline
The naira depreciated against the US dollar across foreign exchange (FX) markets as data showed that the gross balance in Nigeria’s external reserves declined in sequence in the last three days.
The currency market anticipates additional support from the Central Bank of Nigeria (CBN) intervention after a $50 million injection the previous day. During the session, the USD/NGN pair traded within a range of N1,589.50 to N1,595.00.
At the end of the trading activities in the forex market, the naira weakened by 44 bps, closing at N1,590.7471. Analysts at AIICO expect the naira to maintain its present trading band unless significant disruptions occur.
In the parallel market, the exchange rate declined to N1620 due to increased demand. External reserves declined twice this week after a series of inflows in recent past weeks, settling at $38.518 billion after three records of dollar outflows from $38.561 billion last week.
Analysts said the reduced gross balance in foreign reserves was a result of FX interventions.
Despite huge US dollars from the exporters, the CBN flooded the foreign exchange market with $190 million last week. The authority also added $50 million on Tuesday to keep the naira stable by driving FX inflows in the absence of significant FX receipts from oil exports.
The CBN has continued to intervene daily to the tune of $50 million-$100 million, but the general consensus is that this is intended to simply keep supply trickling into the FX market rather than materially holding the rate stable, Verto FX said in a macro update.
Today, oil prices climbed over 1% on Wednesday due to supply concerns, following OPEC+’s decision to maintain current output levels and the U.S. ban on Chevron exporting Venezuelan crude.
This came despite earlier expectations that OPEC+ might raise production later in the week. Brent crude increased by 91 cents, or 1.42%, reaching $65 per barrel, while U.S. West Texas Intermediate (WTI) rose $1.08, or 1.77%, to $61.97.
Gold prices remained mostly unchanged, with investors awaiting the release of the Federal Reserve’s latest meeting minutes. Spot gold hovered at $3,295.43 an ounce.
The upcoming summer driving season is expected to drive significant crude demand growth. With non-OPEC+ production stagnant in H1 2024 and potential Canadian wildfire disruptions threatening supply, market reliance on OPEC+ output is intensifying. BVN Database Dispute: Court Delivers Judgment in NIBSS vs CBN Suit
